"The economic slowdown has done much of the economic work required to get Europe on track towards the 20 per cent reduction target at 2020," he said.

"The fundamental question is whether it is fine to have a carbon price that is near zero because a carbon price isn't really needed to achieve that 20 per cent target, or whether conversely this is now an opportunity to actually ratchet up ambition."

The Australian Industry Group says the European carbon price shows how out of kilter Australia's current price of $23 a tonne is.

It argues Australia's link to the EU scheme should be made now.

But Dr Jotzo says there is a major flaw in that argument, because it would make carbon trading in Australia less effective.

He says the current European and Australian economies are fundamentally different, with Europe in a recession and Australia "still chugging along nicely".

"The larger of those two schemes will dominate, meaning those price settings are not compatible with Australian economic development."

Carbon tax abolishment

Dr Jotzo says a lower price would not make it easier for the Coalition to abolish the carbon tax or emissions trading scheme if it wins government.

"If anything it makes it slightly harder to unwind the scheme because at very low prices like this it's difficult to imagine any significant push from industry for the scheme to be abolished," he said.

Dr Jotzo says many doubt the carbon trading scheme will be abolished in any case.

"We conducted a survey of industry stakeholders on that very issue last year and the feedback we got was mixed," he said.

"Sixty per cent of the sample expected that the carbon pricing mechanism would be retained, [while] 40 per cent expected that it would be abolished.

"Policy uncertainty really dominates this sphere in Australia just as it does in Europe at the moment."